Air India’s 11,000 staff to get 1-year job guarantee

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Published: November 27, 2019 4:06:49 AM

In any privatisation, employee issues of PSUs are of concern to buyers due to high employee costs and low productivity, typical of a government sector firm.

air india, aviation sectorIn June last year, the government called off the proposed sale of 76% stake in AI after no buyer showed interest.

As the Centre is gearing up to invite fresh expressions of interest (EoIs) by December 15 for the sale of its entire stake in Air India, the employees of the national carrier — over 11,000 at last count — will be offered job protection for a period of one year, sources told FE.

“The sale and purchase agreement (SPA) agreement will provide that strategic partner shall not retrench any employees of the company for a period of one year,” an official said. The Centre will share the SPA privately with prospective bidders at the EoI stage itself to help them take long-term view of the various liabilities and plan funding for the deal.

In any privatisation, employee issues of PSUs are of concern to buyers due to high employee costs and low productivity, typical of a government sector firm.

AI’s employee cost was Rs 3,005 crore, 11.4% of the total revenue receipts in FY19. The national carrier employed 11,827 people (excluding casual workers) at March end, 2018. About 37% of the permanent employees of AI are due to retire in the next five years. “Any buyer will like to overhaul the staff in a thin-margin business like airlines to increase efficiency,” another official pointed out.

In June last year, the government called off the proposed sale of 76% stake in AI after no buyer showed interest.

Probable reasons as analysed by the transaction adviser EY for non-receipt of bids last year included the government’s decision to retain 24% stake and corresponding rights, high amount of allocated debt, profitability track record, among others.

The total debt and liabilities of AI have risen to about Rs 73,255 crore at March 2019 end, including a debt of Rs 58,255 crore and liabilities of Rs 15,000 crore. In a debt recast earlier this fiscal, the Centre took over Rs 29,464 crore from AI’s books through a special purpose vehicle (SPV). The government may take over another about Rs 20,000-crore debt, to make it more attractive for buyers.

The strategic buyer may have to take over close to Rs 24,000 crore, including debt backed by assets and liabilities such as working capital loans and dues to aviation fuel suppliers.

Despite delays in starting the process, the Centre is keen to privatise the national carrier by the end of this fiscal. A roadshow on AI sale was held in London by the department of investment and public asset management to address investor queries.

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